Lark Hotels’ Tailored and Specific Approach To Growth

When Lark Hotels launched in 2012, the boutique hotel brand was primarily focused on acquiring and renovating existing properties with anywhere between 10 and 27 guestrooms in seasonal transient markets throughout New England and in California. But while it started small, Lark Hotels tapped into the social zeitgeist in a major way, developing hotels that appealed to modern-day travelers in a way that allowed the company to grow exponentially. Now, Lark has jumped from $2 to $3 million development projects to ones reaching the $25 to $27 million range. “Our scope has changed drastically,” Rob Blood, CEO of Lark Hotels, explains. Blood spoke with LODGING about how the brand has grown and changed over the years, as well as the ways that the lodging cycle is impacting small, niche developers like him.

How has Lark’s development strategy changed over the last five years?
A lot has changed. When we first started out, we were focused on opening properties in New England markets that already had a fairly large supply of rooms. The region has a strong history and tradition of great hospitality that goes back hundreds of years, However, we felt that injecting an updated sense of place and hospitality focus on letting guests experience travel in an unprescribed way would resonate with modern travelers. Our model focused on reinventing existing New England properties to appeal to modern, experience-focused travelers. In the last few years, we’ve rolled out 18 hotels across New England and have found ourselves in some great markets—Newport, Martha’s Vineyard, Nantucket, and so on.

For the last year and a half or so, in the development space, we’ve stepped out of that comfort zone and started doing things like adaptive reuse projects. Today, I’m on site in Salem, Mass., at a property we’re opening in a couple of weeks. Most recently, this building was an office, but historically, it was an anchor department store on Salem’s downtown pedestrian mall. When it opens, it will be one of our largest development projects to date. The Hotel Salem has 44 rooms with two restaurants and a function space/shuffleboard club.

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We’re also working on several developments in the Southeast. These projects include both ground-up construction and historical adaptive reuse. We’ve learned a lot over the few years that we’ve been operating and developing. We’ve also developed a very positive track record that attracts investors for larger and larger projects.

How has the hotel market changed since 2012?
In 2012, the industry was coming out of a down cycle, and it was a good time for acquisitions. There were properties that were struggling, and we had the opportunity to pick them up, which we did. I think what’s changed over the course of these few years is that there were some good value opportunities early in the cycle that are getting harder to find now. From 2012 to 2014, borrowing was pretty easy; hotel lenders were just starting to resell those buckets of hotel portfolios. Now, people perceive that we’re nearing the end of the cycle, so borrowing, financing, and developing hotels—especially ground-up construction—is getting harder. Everyone’s wondering when the tipping point is going to happen. And, as far as I understand, these hospitality buckets are a lot fuller now. It seems that a lot of hospitality portfolios are starting to mature. From my perspective, though, there’s still a lot of great opportunity out there in the right spaces. It’s just taking a little bit longer and it’s a little bit harder to identify where those opportunities are.

What industry trends drove Lark Hotels’ growth?
While I think that we’re aware of industry trends, we try not to pay too much attention to them because trends pass. I think what we’re seeing now is that there’s been a huge focus on developing hotels that cater to millennials. But really, what I see is that there’s been a large shift in our industry from the importance of delivering a consistent product to a focus on creating interesting and unique experiences. And providing a unique experience is not revolutionary in the small hotel and inn business, because innkeepers, if you really get to the root of the matter, are in the business of sharing their community with people. My personal hospitality history started with me as an innkeeper at an eight-room inn on Nantucket. That experience oriented me towards helping people create their own experiences, and I think that, more than anything that’s happening outside of the company, that has been our guiding force.

However, I will add that everyone else seems to be catching on. It seems that every major flag is rushing to appear as though they have independent offerings. I think that everyone’s realized that people want to have a strong sense of place. They want a unique experience. They want to understand the neighborhood and the place they’re visiting; they don’t want to feel like they could be anywhere in the world when they’re in a specific location.

How do you choose locations for your properties?
We tend to focus on iconic locations that have a diverse cross-section of lodging segments—markets that are well known. Early on, we decided that we didn’t necessarily want to create destinations, but rather create unique hotels in known markets. Often we find that a location has driven our guest’s decision to visit. The way we look at it, if they’ve already decided to come to one of our cities, then our job is simply to get them to choose a Lark Hotel. That’s key to our growth strategy. So, right now, we’re looking at Savannah, Ga., Charleston, S.C., Nashville, Tenn.—places people want to go and markets where there’s a good supply. Location drives everything. For us, we believe that it’s got to be a market that people know about.

How is developing a Lark property different from your competitors?
We’re concerned and focused on creating a highly unique experience, and we do that through architecture, interior design, music, smell, service culture, local partnerships—everything. What is of primary importance to us when we’re developing hotels is to create the story first, to identify what the story of the building is, the neighborhood, and the market. Then, from that story, we start the architectural drawings, the design process, the collection of finishes, the music, the ways that our employees are going to be dressed. It all tightly weaves into a brand identity, a tale. I’m not saying that others don’t do that, but if you’re developing a branded hotel, you’re going to get some guidance from the flag about what you have to do. The beauty of developing a Lark Hotel is that you have a tremendous amount of creative autonomy to really dig into the story.

Do boutique developers have any advantages in our current lodging climate?
Certain markets have far too many branded rooms. That’s just a fact. However, for developers and investors, there’s always an opportunity for a unique, independent property that speaks to the character of the city. Again, that’s what we found when going into markets that already have a large supply. People are often afraid to really double down and say, “Okay, we’re not going to go with a flag hotel because I think financing is going to be more difficult.” They think they might lose a few occupancy points, but if you have the right operator, you have the right look and feel, and you have the right branding strategy, an independent hotel can really drive more to the bottom line.

Photo: A guestroom at Blue, a Lark Hotels property on Plum Island, Mass.